Government changes stance on pension reform plan in one day

With politicians of the ruling and opposition parties strongly opposed to the government’s plan to change the economic structure, the government reversed its plan to reform the military pension and the private school teachers’ pensions next year. Critics say that the government has thus weakened its commitment to reform the economy by itself, because it shifted stance only a day after announcing a plan to reform pensions as part of its economic policy direction for next year.

Jeong Eun-bo, assistant minister at the Strategy and Finance Ministry, told reporters on Tuesday, “We are not considering reform of the military pension and private school teachers’ pension at present.” Jeong added, “Schedules to develop plans to reform the military pension and the private school teachers’ pension are included in economic policy direction for next year, but working-level officials have not had adequate discussions on these issues, and the government has not finalized its decision yet.” He went on to say, “The military pension is very special in terms of functions, while the private school teachers’ pension is not currently facing a significant problem in finances of the fund.”

In its economic policy direction announced on Monday, the government singled out pension reform as a core task, and specifically announced that it would present ways to reform the private school teachers’ pension in June, and the military pension in October. Reform of the military pension and the private school teachers’ pension were included in specific tasks to implement under the ‘three-year plan on economic innovation,’ the framework of the Park Geun-hye administration’s economic policy. The two pensions are expected to incur 52 trillion won (27.2 billion US dollars) in combined deficit through 2030, and if they are maintained under the current system, deficits in their finances should be made up for with taxpayers’ money.

The government has reversed its plan to reform the pensions due to the ruling Saenuri Party’s strong objection. At Saenuri’s internal meeting on the day, Kim Jae-won, senior vice floor leader of the party, said, “Making public plans that have not been adequately considered by the government and thus causing concerns to stakeholders is an act that cannot be forgiven,” adding, “The ruling party is effectively struggling with troubles as it is trying to clean up mess to back up the government.”

Oh Jeong-geun, economics professor of special appointment at Kunkuk University, said, “The change in stance could send a wrong message that if one resists a reform plan, reform will be delayed, which in turn can also make it difficult to achieve labor and education reform.” On such criticism, a source at the Strategy and Finance Ministry said, “Because other public pensions can be reformed only after the civil servants pension is reformed first, and the government’s original intention to focus on reform of the civil servants pension first has not changed.”